Flights of Knowledge

How much is knowledge worth? Specifically, in hard currency. That’s a tough question, and when it is next to impossible to assign a value the value is somehow diminished. Or at least it doesn’t play a major part in decisionmaking. And that’s why poor decisions are being made that will have profound impact on organizations, companies, and even nations.

Let’s start with organizations. We’ve all dealt with bosses who are more interested in whether someone comes in within two minutes of 8am than in whether the person’s output created value. Enlightened bosses and companies learn how to manage by project deliverable and value instead of time. Focusing purely on time diminishes the potential value of an employee, and it becomes likely that high-performing individuals in such an environment will leave, taking their knowledge, creativity, and experience with them. Unfortunately those types of organizations usually won’t realize what they have lost.

Some companies take the level of knowledge ignorance to a whole new level. An example is Whirlpool, which we told you about a couple months ago. In order to save a few bucks an hour they are laying off 1,500 employees at two plants in the U.S., and then hiring a similar number at one of their plants in Mexico. On a traditional P&L that looks like a great deal, but what about from a knowledge perspective? 1,500 people with an average of 10 years experience is 15,000 years of knowledge and experience. 1,500 replacement people probably totals about 50 years of experience. What is the cost of losing 14,950 years of experience? Let alone the quantifiable (but often still off-balance sheet) costs of a longer supply chain, greater turnover, training costs, and the like. Just because a dollar figure can’t be assigned to the knowledge doesn’t mean it has no value.

But flights of knowledge are also happening on a global scale. Consider the following recent news items:

Professionals Exit Venezuela from yesterday’s Wall Street Journal. As Chavez transforms Venezuela from a democracy to a dictatorship, experienced professionals are fleeing the country, ironically to the United States. A large number of these knowledge workers are in the petroleum industry, which Venezuela relies upon to sustain the inefficiencies of a non-market economy. Extraction efficiency has already fallen by as much as 50% at some nationalized operations. That doesn’t bode well for future growth.

Germany’s Brain Drain from The New York Times. "Doctors, engineers, architects, and scientists" are fleeing the country due to "a stifling bureaucracy, high taxes, rigid labor market, and plodding economy." Reiner Klinholz, director of the Berlin Institute for Population and Development is worried that the professionals leaving are exactly "what Germany needs to compete with up and comers like China and India."

Rich and Successful Flee France from Paris Link. "On the one hand, France is portrayed as a strong and confident country, whose people, unlike the Americans, are committed to ‘social solidarity.’ On the other hand, there is the reality of high taxes, high unemployment, uncertainty, and a general feeling of malaise. As more of the young, educated, and successful French move abroad, the welfare state will grow more unsustainable."

Canadian Doctor Brain Drain from CMAJ (Canadian Medical Journal). Although it has slowed slightly in the last couple years, the number of medical professionals fleeing the constraints of single-payer government healthcare in Canada to move to the U.S. equals 30% of the output its medical schools. A tangible value – and cost – can be assigned to that.

Foreign Scholars Returning to India and China from IIE. Perhaps balancing the flow of professionals to the U.S., foreign students at U.S. universities who previously would try to stay in the U.S. to work are now returning to their countries of origin due to the growing and globalized nature of those emergent economies creating new opportunities. The tendency of foreign scholars to stay in the U.S. has traditionally been a problem holding back the development of third world countries while providing additional knowledge infrastructure in the U.S..

So whether it’s as simple as tracking working hours instead of value creation, or as complex as the effect of excessive regulation and taxation, the impact on knowledge assets can be significant. However since the true value of those assets cannot be readily measured, it does not quantitatively factor into decisionmaking, and therefore the effects do not manifest themselves until it is sometimes too late.

Comments

An interesting post, and you’re certainly right about the importance of knowledge. But I’m not sure it’s meaningful to calculate a knowledge asset as 1500 employees times 10 years of experience equals 15000 years of knowledge and experience. Useful knowledge and experience doesn’t necessarily grow linearly with knowledge and experience; it depends on how the job is structured. In a thoroughly Taylorized assembly plant or customer service operation, I doubt that a person with 3 years of experience has 3 times the useful knowledge of someone with 1 year of experience…maybe 20% more, but certainly not 3X as much. In a lean operation with heavy employee involvement, however, the ratio of value of the 3-year person to the 1-year person is likely to be much higher…probably still less that 3X, though.

I don’t want to make too much of your example of the value creating employee who shows up late, but there are two sides to that coin. If a person is allowed to be late because they create value for the company, then everyone should be allowed to be late. If you do that, chaos ensues and the value probably goes out the window. If you don’t allow everyone to be late, the people not allowed begin to believe they are not valued for their efforts, their created value drops off, and you have lost the value of one person for the sake of another. Anyone with the maturity to share your vision and create value for the group also has the maturity to come to work on time.

Who is going to be responsible for turning the tide of talent drain? Not the gov’ts, who cause most of it, but the very people who are leaving. People can either try to enact change from within (difficult) or quit (easy). This is the very reason countries like India are seeing more and more of their young US-educated professionals return home, because they have made the choice to better their own country rather than leave their family, friends, and countrymen behind. It takes a conscious, concerted effort by people who understand the phenomenon to change it. Many just don’t have the stomack for it, whether it is changing a country or a company.